"Today we're closing one chapter and opening a new one in our relationship with Microsoft," said Rob Glaser, founder and chief executive of RealNetworks, in a joint news conference with Microsoft chairman Bill Gates.
"The legal chapter is being closed with an appropriate and fair outcome that sets the stage for a very productive and collaborative relationship between our companies," said Glaser, who left Microsoft in 1994 to start RealNetworks.
The deal settles the claims from Real's 2003 lawsuit in the United States and its participation in the cases in the European Union and South Korea against Microsoft.
It ends a legal battle with a company that had been one of Microsoft's harshest critics, claiming that the world's biggest software company used its monopoly in the Windows operating system to squelch competition in areas such as media software for audio and video files.
Microsoft agreed to allow RealNetworks access "to a broad range of Windows platform technologies" to ensure that it works in Windows-based computers.
The agreement also calls for promotional and marketing support of Real's digital music service Rhapsody on Microsoft's MSN networks. It also would make RealNetworks' digital games available through MSN Games and Xbox Live Arcade for Xbox 360.
"This agreement will provide MSN's millions of customers with easier access to subscription services for the music and games they love," said Gates in a joint statement from the companies.
"Digital music is one of the fastest growing segments of the online entertainment industry, and by promoting Rhapsody's subscription music services from within MSN, we will provide a better experience for our users."
RealNetworks had alleged in its suit that Microsoft entered into restrictive licensing agreements with PC makers to steer Internet consumers toward its Windows Media Player software, thereby crippling the position of the Real Player.
The suit, filed in late 2003, initially sought damages of more than $1 billion.
Under the deal Microsoft will pay RealNetworks $460 million in cash upfront, and give RealNetworks long-term access to its Windows Media player technologies, to resolve all antitrust disputes between the two.
Microsoft based in Redmond in the northwestern state of Washington, will also pay its cross-town rival RealNetworks $301 million in cash and provide services for 18 months to support RealNetworks' product development, distribution and promotional activities, it said.
The cash and promotion on Microsoft's MSN service could benefit RealNetworks' Rhapsody online music service, according to analyst Mike Latimore at Raymond James and Associates.
"The promotional element of a potential settlement would be a boost for RealNetworks' online media services, and the additional cash would support further acquisitions in Real's target markets," the analyst commented in a note.
The deal is the latest in a string of settlements in suits brought by major rivals that Microsoft, the world's largest software company, has settled in recent years for several billion dollars after it was found to have abused its monopoly position.
Among its recent settlements Microsoft in July paid $775 million to IBM. It also reached settlements with Sun Microsystems and with Time Warner Inc. related to Netscape and its America Online Web unit.
Analyst Joe Wilcox at Jupiter Research said that the latest deal is positive for both firms.
"Real gets a heap of cash and dispatches a potentially distracting and costly lawsuit," he said. "Microsoft dispatches one more lawsuit, perhaps the largest remaining one related to its US antitrust case."
Wilcox added that "the settlement could help Microsoft's position in Europe", although EU antitrust officials reaffirmed their commitment to pursuing their case.
© 2005 Agence France-Presse
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